Half Moon Bay budget sees drop in expected revenue

“They are decisions we are going to have to make all together and keep each other informed, but at the end of the day, it’s on our watch,” Councilmember Robert Brownstone said about the city’s financial future.

The 2023-24 budget shows general fund revenue is at $21.2 million, a loss of around $1.8 million compared to last year’s cycle, or about 8%. Around $9.6 million in revenue comes from transient occupancy tax, $3.9 million from property taxes and $3.2 million from sales tax. The city is losing about $1.5 million in American Rescue Plan Act funds from the federal government to address the economic impacts of the pandemic, a significant contributor to the revenue loss compared to last year. Overall revenue projections remain flat due to a potential economic slowdown.

The city estimates it will need to use around $3.7 million in unallocated general fund balance to meet the expected deficit gap in the 2023-24 budget, according to a city staff report. The city believes costs will exceed revenue over the next few years without changes, causing a deficit requiring the use of reserves or cutting costs.

According to a staff report, the five-year forecast for general fund reserves shows it will run out by fiscal year 2028-29. The city estimates around $11 million in reserve for the 2023-24 year. However, it is expected to decrease to $8 million in the next fiscal year if trends hold.

The city is seeing a 12% increase in total expenditures for its budget compared to last year due to capital improvement projects. General fund expenditures show public safety is 27% of the budget, the highest by department, with 16% going to public works. The city currently contracts with the San Mateo County Sheriff’s Office for city policing services and first started in 2011 to help with cost savings and increase services and efficiency. The law enforcement contract will increase by about $1.5 million in this budget, according to the city. City staff have said they plan to explore performance measures to ensure the city is getting the most value for their money. City Manager Matthew Chidester said the city needs to grow its expectations for the Sheriff’s Office, given the increased costs. Councilmember Debbie Ruddock suggested working more closely with cities to discuss contracts and gather information to help with negotiating power.

“I think there is power in numbers,” Ruddock said.

Note to readers: This story has been changed. It had previously incorrectly stated the city was using around $3.7 million in reserves to meet the deficit gap in the 2023-2024 budget. The city used $3.7 million in unallocated general fund balance to address the gap.